GAAS Standards vs. GAGAS Standards

GAAS standards vs. GAGAS standards

Historically, accounting is concerned with the recording of financial transactions of an organization in the books of accounts. The process of accounting usually ends in a financial statement or a report. Moreover, non-financial reporting methods are becoming more usual. Akin to audit, accounting methods vary among the public as well as private sectors. The methods of accounting are being adopted to be used in both the public as well as private sectors. These different methods establish the manner in which income and expenditure is recorded, and the juncture that particular information is recorded. They also supply different type of information on capital, assets and liabilities, and also budget. (White; Hollingsworth, 26)

Generally Accepted Auditing Standards -- GAAS is a collection of organized guiding principles that is used by Auditors while undertaking audits on companies, finances, guaranteeing the correctness, reliability and verifiability of auditors' actions and reports. It is through the reliance of GAAS, that the auditors are able to minimize the probability of missing material information. The GAAS is segmented into principal sections which are (i) general standards (ii) standards of fieldwork (iii) standards of reporting. (Generally Accepted Auditing Standards)

The GAO issues the Generally Accepted Government Auditing Standards -- GAGAS having the standards with regard to audits with regard to the governmental institutions, activities, programs, as well as roles, and also of government support obtained by non-profit establishments, contractors, and other non-governmental institutions. These standards relate with regard to the professional qualification of the auditors, the audit activity quality, and the features of useful professional audit reports. (Accounting an Auditing Standards)

It is observed that Accountants visualize themselves discharging tasks as a routine manner in an environment that is regulated by an intricate set of rules, principles, and practices. While performing their tasks they are given to assume a certain role. While performing their roles, accountants encounter official or legal rules of behavior as also moral elements created by specific circumstances. It is through acceptance of roles that accountants accept concurrently the consequential obligations. The rules assumes the presence of moral standards which impact the welfare of human being are not established or changed by decisions of authoritative bodies and are proposed to prevail over self-interest and are founded on impartial considerations. (Riahi-Belkaoui, 72)

On deciding upon the appropriate auditing standards, it is a fact that while GAAS are normally used for private as well as public sector audits, the government entity might be applicable for 'federal regulations, state statutes, grant terms, or the Single Audit Act' and therefore might be necessary to use the GAGAS which are used by the Comptroller General of the United States. GAGAS include GAAS, but also entail more auditor responsibilities, inclusive of specific reporting with regard to control within and adherence with the relevant rules and laws. It will be needed to establish and be specific regarding the correct standards for the auditor to observe. (RFP Guide: The Georgia Deptt of Audit & Accounts)

As regards internal control, the procedures in connection with internal control structure for a GAAS auditing are considered to be similar compared to that for an audit performed with regard to GAGAS, but the reporting is different. This is due to the fact that it is basically a role for the various audiences which these types of reports are meant for. For the major part, governmental reports usually tend to be a part with regard to the public forms of record. Due to this inherent nature, they might be perused by those who are not so much conversant with auditing processes and the roles as also functions of auditor compared to that of an audit of the private sector, that is considered by the management members as also the audit committee having clear information as regards the engagement of the audit. Since the bygone years, one of the important goals of auditing standard creators has been enhancing the interactions among the auditors as well as their services users. (Broadus, 7)

In this effect, during the initial part of the year 1988, the auditing standards board of the American Institute of CPAs brought out a lot of new types of SASs, many of which are targeted towards improving the communication of auditors. Also during that period, rising public focus was being provided on the audit of governmental bodies. Therefore even when the new SASs is considered to be settled, the GAO was reviving GAGAS as contained with regard to the yellow book. The yellow book, similar to the AICPA standards contains the need for auditor interactions that have been given effect since Jan 1, 1989. Among the areas of communications dealt within the yellow book is the duty of auditors for interacting with the aspects of internal regulation observed at the period of audit. This role was dealt with for GAAS audit in the SAS no. 60. Nevertheless, the yellow books do not give any particular illustrations of the communication of issues associated with internal regulation structure; its needs in certain areas are wider compared to GAAS. Thus, to assist, the Auditors make GAAS applicable in governmental audits; the ASB designed SAS no. 63 that gives information regarding the manner in which auditors must change SAS No. 60 reports with regard to the internal regulation structure to fulfill the needs with regard to the yellow book. (Broadus, 8)